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Market Line

Business and economic news from Indiana University

EDITORS: With this edition we reintroduce Market Line, a regular feature that will highlight expertise and research at Indiana University on business and economic issues. Contact information for expert sources is included. If you would like photos or further information on any of these story ideas, contact George Vlahakis of IU Media Relations at 812-855-0846 or gvlahaki@indiana.edu.

Under NAFTA, one would expect that border states would develop closer trade ties with neighboring Canada and Mexico, but this simply has not been the case, according to Lawrence S. Davidson, professor of business economics and public policy in IU's Kelley School of Business. In a 2003 study, Davidson found that northern border states were selling more goods to Mexico, while states to the south increased sales to Canada. "This crisscross pattern implies that factors other than distance were determining trade patterns in North America," Davidson wrote in a chapter for the book, Transatlantic Perspectives (Lit Verlag, Germany; 2004). In his new research, Davidson factored in trade with 15 European Union countries and concluded, "Whether they were becoming more or less similar, the result was the same -- global factors were causing industry responses that had little to do with distance and everything to do with industry factors ... Industry-specific factors should not be minimized with respect to where trade takes place." Policymakers interested in understanding and promoting export activities need to understand that future success may be related to past sector strengths and may need to recognize that they have less control than ever over the growth of export sales, he concluded. Davidson can be reached at 812-855-2773 or davidso@indiana.edu.

Retaliation against whistle-blowers often receives as much attention as the alleged wrongdoing. How often does it squash the bad news from coming out? Not often, according to a new study co-authored by Janet Near, the Coleman Chair of Management in IU's Kelley School of Business. In a new article in the journal Academy of Management Proceedings, Near and three co-authors found that retaliation against whistle-blowers most often was related to serious or major wrongdoing by the organization and less related to the whistle-blower's power within the organization. Whistle-blowers who suffered retaliation were more likely to then blow the whistle externally, to the media or government. "Managers who believe that retaliation will dissuade whistle-blowers from future whistle-blowing may be inadvertently driving their whistle-blowers to external channels, making public disclosure of their wrongdoing more likely. Even if whistle-blowers did not suffer retaliation after internal whistle-blowing, they were still likely to turn to external channels if the wrongdoing was more serious," wrote the authors, who included Michael T. Rehg of the U.S. Air Force Operational Test and Evaluation Center. They surveyed 238 whistle-blowers at a large military base, who were identified from a larger sample of 9,906 military personnel and civilians. "Previous studies have shown that the majority of whistle-blowers who use external channels have also blown the whistle internally. Knowing what causes whistle-blowers to report wrongdoing externally is critical. Generally, it is in an organization's best interests to resolve its problems internally," Near and her colleagues concluded. Near, also co-author of the book, Blowing the Whistle: The Organizational and Legal Implications for Companies and Their Employees (Rowman & Littlefield), can be reached at 812-855-3368 or near@indiana.edu.

The music industry faces considerable pressure to adopt new e-commerce business models that will reverse declining revenues and thwart the efforts of free music providers. "Access to free music online has redistributed power in the music industry to individual consumers," said Mark Fox, professor of management at IU South Bend. "Copy protection technologies to date have proved unsuccessful, and litigation has not halted the downloading of music files over the Internet." In a paper published in the current issue of Popular Music and Society, Fox recommended that music companies need to price downloaded music in a way that "recognizes the lower costs of providing music via the Internet" and to provide content that has value above that provided by free music services. "The recent stagnation of global music sales makes it unlikely that the industry can achieve future growth through existing business models that rely on the distribution of physical music products, predominantly CDs," Fox said. In his paper, he outlined the advantages and disadvantages of various models, including the broadcasting, subscription and pay-per-track models, and why some musicians can successfully market directly to fans. Fox can be reached at 574-237-4363 or mfox1@iusb.edu.

Don't cancel that meeting yet. A new survey found that electronic brainstorming is not yet widely accepted in common business settings. In numerous research studies, electronic brainstorming has been noted as an effective means of generating many good-quality ideas. But according to a study published by two IU researchers in MIS Quarterly, electronic brainstorming has not displaced, or even joined, verbal brainstorming -- often done face-to-face -- as a widely accepted practice in many companies. Alan Dennis, the John T. Chambers Chair of Internet Systems, and Bryan A. Reinicke, a doctoral student in Information in the Kelley School, surveyed a group of managers and asked them how they prefer to brainstorm ideas. "What this research shows is that people don't recognize the potential benefits we've seen from using the technology. But there are other things beyond performance that matter," Dennis said. "The bottom-line implication to me is that it makes sense to use these technologies for one part of the process. If you really want to get creative, innovative, high-quality ideas, then electronic discussion is clearly better than verbal discussion. On the other hand, if you want to build a good team, strengthen the relationships and allow opportunities for mentoring and individual growth, then verbal discussion is better." Dennis can be reached at 812-855-2691 or ardennis@indiana.edu.

Ninty percent of U.S. office workers go to work in business-casual clothes at least once per week, but does this lead to greater efficiency? Previous studies have examined the effects of casual dress policies on employee satisfaction and relationships, but it has been more difficult to pinpoint whether it helps the bottom line. Steven Norton, associate professor of management at IU South Bend and co-author of an article in the September issue of the Journal of American Academy of Business, Cambridge, surveyed about 100 business people and perhaps has an explanation: attitudes about casual dress policies are highly subjective. "Overall, employees in our sample who prefer a more formal dress policy and wear more formal clothes themselves report that they commit more time to work, see the organization as fairer, are more conscientious, have higher job satisfaction and have more supervisory responsibility. Employees who work under a more formal dress policy report that they are more conscientious," Norton wrote with co-author Timothy Franz at St. John Fisher College. "It is possible that a major impact of dress policy on organizations is due to self-selection of employees. That is, employees who prefer a particular mode of dress are more likely to accept a job offer from an organization which allows that mode." Dress preference also could be a minor factor in job choice, but still impact on employees' satisfaction once they are working for a company. Norton can be reached at 574-520-4418 or snorton@iusb.edu.

Upcoming economic events (with recommended IU expert):

Friday, Sept. 3 -- Release by the U.S. Bureau of Labor Statistics of U.S. employment and unemployment data for August (Bill Witte, IU associate professor of economics and a director of the IU Center for Econometric Model Research, 812-855-2080, witte@indiana.edu)

Friday, Sept. 10 -- Release of current employment statistics for Indiana and Indiana MSAs for August by the Indiana Department of Workforce Development (Bill Witte, IU associate professor of economics and a director of the IU Center for Econometric Model Research, 812-855-2080, witte@indiana.edu)

Friday, Sept. 24 -- Release of labor force estimates for Indiana counties and MSAs by the Indiana Department of Workforce Development (Jerry Conover, director of the Indiana Business Research Center, 812-855-5507, conover@indiana.edu)

Tuesday, Sept. 28 -- Release of state personal income data for the second quarter by the U.S. Bureau of Labor Statistics (Jerry Conover, director of the Indiana Business Research Center, 812-855-5507, conover@indiana.edu)

Wednesday, Sept. 29 -- Release of gross domestic product data for the second quarter by the U.S. Bureau of Labor Statistics (Bill Witte, IU associate professor of economics and a director of the IU Center for Econometric Model Research, 812-855-2080, witte@indiana.edu)

Stats Indiana -- An information service of the Indiana Business Research Center that is a constantly updated repository of data on the economy, population and the workforce. Features include comparative profiles of U.S. counties and states, and maps. It is located at http://www.stats.indiana.edu/.

Center for Urban Policy and the Environment -- A topical and wide-ranging resource of research and other information about policy issues, such as those involving land use, economic development and non-profit, located at IUPUI's School of Public and Environmental Affairs and online at http://www.urbancenter.iupui.edu.